V. Discussion

We begin with the question whether dismissal is appropriate of the causes of action asserted against SBC California due to its alleged involvement in a misleading advertising campaign.15 These allegations are central to this case, because complainants have argued from the beginning that SBC California (or Pacific Bell) sought to persuade DIRECTV customers they would experience less downtime by choosing SBC Yahoo as their new ISP, even though defendants knew this to be false. However, for many of the same reasons cited by the ALJ in denying a TRO on January 30, we conclude that complainants' claims of false and misleading advertising must be dismissed.

As noted above, complainants contend that both the December 27, 2002 press release issued jointly by SBCIS and DIRECTV (Exhibit 2 to the Amended Complaint), and the undated mailer bearing the SBC logo that was mailed to DIRECTV customers (Exhibit 6 to the Amended Complaint), falsely suggest that if these customers want to minimize disruption to their DSL service, they should choose SBC Yahoo as their new DSL provider. (¶¶ 27, 34.)

The fundamental difficulty with this theory is that when read in context, neither the press release nor the mailer suggests that a customer who chooses SBC Yahoo as the customer's new DSL provider will experience any less downtime than a customer choosing a non-affiliated ISP. While the press release quotes DIRECTV's president as saying that "our top priority through this transition is to ensure that all of our customers continue to access their broadband service with the least amount of disruption possible" (emphasis added), nowhere in the press release is there stated or implied a comparison between the downtime associated with SBC Yahoo service versus a non-affiliated ISP's service.

In fact, the only other mention of downtime in the press December 27 release comes in a subparagraph offering "[f]ree SBC Yahoo! Dial service for 30 days if SBC Yahoo! DSL is ordered within that time. The dial service provides an interim solution for customers since their DIRECTV DSL service must be disconnected before the SBC Yahoo! DSL service can be activated." (Emphasis added.) Apart from making the offer of dial service, all this subparagraph does is inform the DSL subscriber that some downtime is involved when one switches from DIRECTV to another ISP. No comparison is stated or implied between the downtime that will be experienced with SBC Yahoo service versus any other ISP's service.

With respect to the mailer (which is Exhibit 6 to the Amended Complaint), complainants contend that the following paragraph suggests subscribers will experience less downtime if they choose SBC Yahoo rather than another ISP:


"Now that DIRECTV Broadband is no longer offering DSL service, what do you do? Easy. Go with two of the best known names in the business - SBC and Yahoo! Just named the preferred service for DIRECTV DSL subscribers, SBC Yahoo! will pick up where you left off, and then some, with Internet that logs onto you. Just call us today . . . and we'll make the transition as smooth as possible." (Boldface in original; italics added.)

Complainants' claims with respect to this paragraph are also without merit. Saying that SBC Yahoo DSL service "will pick up where you left off," and that SBC will "make the transition as smooth as possible" is puffing; the language does not imply that the downtime the customer will experience with SBC Yahoo is any less than with another ISP's service. At most, the paragraph extols SBC Yahoo service and suggests it will be as good as any other ISP's.

It is clear under California law that in evaluating the capacity of advertisements such as the mailer and the December 27 joint press release to mislead consumers, the standard to be used is the understanding of a reasonable consumer, and that in appropriate circumstances this understanding can be determined as a matter of law. The reasonable consumer standard is the one used under Business & Professions (B&P) Code § 17500 et seq. (the so-called False Advertising Act) as well as B&P Code § 17200 et seq., which together form the Unfair Competition Law (UCL). We also believe it is the appropriate standard to apply under Pub. Util. Code § 2896, upon which complainants rely.16 As the First District Court of Appeal recently said of the UCL in Lavie v. Procter & Gamble Co., 105 Cal.App.4th 496 (2003):

"California and federal courts applying the UCL have never applied a `least sophisticated consumer' standard, absent evidence that the ad targeted particularly vulnerable consumers. Rather, they have consistently applied a standard closer to an ordinary or `reasonable consumer' standard to evaluate unfair advertising claims." (105 Cal.App.4th at 504.)

It is also clear that under the Unfair Competition Law, whether a particular advertisement is misleading can be determined as a matter of law. As stated by the court in Haskell v. Time, Inc., 857 F. Supp. 1392 (E.D. Calif. 1994):

"Advertising that amounts to 'mere' puffery is not actionable because no reasonable consumer relies on puffery. The distinguishing characteristics of puffery are vague, highly subjective claims as opposed to specific, detailed factual assertions . . . Whether the alleged misrepresentations amount to mere puffery may be determined on a motion to dismiss . . . Similarly, if the alleged misrepresentation, in context, is such that no reasonable consumer could be misled, then the allegation may also be dismissed as a matter of law." (857 F.Supp. at 1339; citations omitted; emphasis added.)

Although the press release and the mailer might have been more explicit on the issue of downtime, no reasonable DSL subscriber who read them could have concluded that less downtime was being promised with SBC Yahoo service than with any competing ISP's service. As the ALJ noted at the TRO hearing, DSL subscribers as a group are generally sophisticated consumers with the ability to distinguish between specific promises and mere puffery. The language cited by complainants in the joint press release and the mailer are clearly examples of the latter. Accordingly, complainants' claims of false advertising should be dismissed as a matter of law.

Complainants fare no better with their claims that SBC ASI violated the anti-discrimination provisions of the Pub. Util. Code by failing to provide information to non-affiliated ISPs on the CPSOS system between December 13 and December 30, 2002 about the disconnect dates for DIRECTV customers. The problem with this theory is that the Amended Complaint's allegations are directly contrary to the testimony of SBC ASI's witness at the TRO hearing about how the CPSOS system works, testimony on which complainants made no timely request for discovery and on which they had a full opportunity for cross-examination.

In claiming discrimination on the CPSOS system, complainants rely on the January 9, 2003, declaration of James Murphy, the president of DSLExtreme, a declaration they also presented at the TRO hearing. In paragraph 4 of his declaration (which is included as Exhibit 5 in the Amended Complaint), Mr. Murphy states:

"This disconnection information is usually available and is vital to inform potential or new subscribers about the status of their DSL service orders. The CPSOS failure prevented DSLExtreme from informing these potential subscribers when they would lose their DirecTV DSL service, or allowing any reasonable estimate as to when any newly established DSL service could be functional."

Mr. Murphy's assertions about what is "usually available" on CPSOS was directly contradicted in the prepared testimony of Becky De La Cruz, which was served on all parties by SBC ASI on January 27, 2003. In her testimony (which was admitted into evidence at the TRO hearing as Exhibit 9), Ms. De La Cruz states that Mr. Murphy's characterizations of how the CPSOS system works are "false," and indicative of his "lack of knowledge" about the system generally and about "the information provided to ISPs about the DirecTV transition." She continues:

"As all ISPs that use CPSOS know, ASI's CPSOS system is designed so that each ISP can only view and access information regarding orders that ISP has placed. ASI built this security into the CPSOS to protect each ISP's proprietary information from being seen or used by one of its competitor ISPs. Therefore, these statements by Mr. Murphy are false.

"In the normal course of business, only the ISP that has the subscriber can send in a disconnect order for their subscriber, and ASI's systems do not allow other ISPs to be privy to what is happening between the ISP and its subscriber . . . If another ISP acquired a DirecTV subscriber, the end user would request DirecTV to disconnect the service, and the acquiring ISP would need to wait for DirecTV to send in the disconnect order before the acquiring ISP could send in a new connect order. The acquiring ISP would not have access to the disconnect information in CPSOS to indicate when that would occur.

"However, in order to enable its subscribers to transition to any other ISP more easily, DirecTV took the extraordinary measure of authorizing ASI to make the DirecTV subscriber information available to all ISPs. DirecTV provided ASI with a written authorization to make the DirecTV subscriber information available to all ISPs specifically for the purpose of placing disconnect and new connect orders on a DirecTV subscriber's line when the ISP has received authorization from a DirecTV subscriber to change their service to such ISP. Upon receiving this special authorization, ASI had to re-program its CPSOS system in order to make an exception to the built-in security. ASI was able to accomplish this re-programming and make DirecTV's accounts available to all ISPs beginning on Dec 30, 2002." (Exhibit 9, pp. 20-21.)

In light of this testimony -- which was not contradicted at the TRO hearing (Tr. 94-96) -- complainants cannot rely on Mr. Murphy's declaration as the basis for a discrimination claim. Once complainants received the testimony of Ms. De La Cruz on January 27th, they could have requested an opportunity to conduct discovery to determine whether they could discredit her unambiguous assertions about how CPSOS works. However, complainants made no such request. In light of this, and the full opportunity for cross-examination they were afforded at the TRO hearing, it would not be fair to give complainants yet another opportunity to amend their complaint in the hope they can state a claim for unlawful discrimination based on when the disconnect information about DIRECTV customers first appeared on CPSOS.

Although the Commission is not required to follow technical rules of evidence and looks to the discovery provisions of the Code of Civil Procedure (CCP) only for guidance,17 we note that our ruling here finds support in cases construing CCP § 437c(h). This statute provides that on a motion for summary judgment -- which these dismissal motions, supported by both declarations and TRO hearing testimony, resemble -- "if it appears from the affidavits submitted in opposition to [the motion] . . . that facts essential to justify opposition may exist but cannot, for reasons stated, then be presented, the court shall deny the motion, or order a continuance to permit affidavits to be obtained or discovery to be had or may make any other order as may be just."

The Courts of Appeal have consistently held that when a 437c(h) situation arises, the party opposing summary judgment must make a timely motion for a continuance to obtain additional discovery, and that without such a motion, the decision granting summary judgment cannot later be attacked for alleged discovery limitations. For example, in Zamudio v. City and County of San Francisco, 70 Cal.App. 4th 445 (1999), the issue was whether a summary judgment granted in favor of a subcontractor on an injured employee's negligence claim should be reversed. In affirming the summary judgment, the Court of Appeal held that appellant's failure to request a continuance and discovery pursuant to § 437c(h) constituted a waiver of his objections:

"Appellant complains that, while he sought the entire contract [between San Francisco and the construction manager] in discovery, only excerpts of the contract were presented. Presumably, the inability of the trial court to consider the entire contract somehow prevented appellant from resisting the motions for summary judgment. Appellant does not explain why a motion to compel production of the entire contract was not filed. Nor is it explained why a continuance of the hearing, pursuant to [CCP § 437c(h)] was not sought . . . Moreover, although this very issue was mentioned in the points and authorities filed in opposition to summary judgment, such reference does not serve as a substitute for an evidentiary objection or request for continuance . . . Appellant's objection was waived in the trial court. Thus, he may not now raise it on appeal." (70 Cal.App. 4th at 454; citations and footnotes omitted.)18

In view of Ms. De La Cruz's unambiguous testimony about CPSOS's partitioning features, the fact that complainants knew they would be expected to conduct cross-examination on this testimony at the TRO hearing, and their failure to request any discovery regarding the testimony, complainants cannot continue to rely on Mr. Murphy's January 9 declaration as the basis for a claim of unlawful discrimination with respect to CPSOS. Accordingly, the Amended Complaint's allegations of discrimination based on failure to make DIRECTV disconnect information available on CPSOS must be dismissed.

As noted above, the final major allegation against SBC ASI in the Amended Complaint is that because the company did not inform non-affiliated ISPs that DIRECTV planned to keep its network in operation until February 28, 2003 - a fact that was known to SBCIS, SBC ASI's affiliate -- SBC ASI has unlawfully discriminated among its wholesale DSL Transport customers. (¶ 42.) The loss of customers supposedly brought about by this conduct was allegedly aggravated by publicity such as the December 27 joint press release, which quoted DIRECTV's president as saying that "we have communicated to our customers that the DIRECTV Broadband network will be operational until at least January 16, 2003," thus raising the possibility that DIRECTV might shut down its network two months earlier than a prior statement had indicated.

While it is clear that DIRECTV's website did not inform customers in SBC territory about the February 28 shutdown date until just before the TRO hearing in this case, the difficulty with complainants' discrimination theory is that they do not allege that SBCIS became aware of the February 28 date as a result of any preferential treatment by SBC ASI. As stated in SBC ASI's motion to dismiss the Amended Complaint:

"[T]he amended complaint fails to allege that SBC ASI informed its affiliate SBCIS of the February date. If SBC ASI did not inform any of its ISP customers of this [DIRECTV] plan, and Complainant[s] fail to allege that it did, there is no basis for a claim of discrimination. All of its ISP customers were treated in the same manner by SBC ASI." (SBC ASI Motion to Dismiss, p. 3; footnote omitted.)19

In addition to attacking the above-noted argument as a quibble over pleading, the complainants give short shrift to SBC ASI's argument that it would have been inconsistent with the company's policy of protecting confidential ISP customer information (as described by Ms. De La Cruz) if the February 28 shutdown date had been revealed to all ISPs contrary to DIRECTV's wishes:

"The information regarding the continued functionality of DSL Transport to [DIRECTV's] customers does not qualify for such protection. It was no secret that [DIRECTV] was going out of business and that its network would cease to function at some date. The status of the [DIRECTV] network was vital information necessary for all ISP customers to place orders for [DIRECTV] refugees and market to potential [DIRECTV] customers. Without that knowledge, and in combination with [DIRECTV's] threats to eliminate its network, ISPs were prevented from making an informed decision on ordering DSL Transport." (Complainants' Reply To Motions to Dismiss, p. 14.)

We conclude that based on the facts alleged, the Amended Complaint does not state a cause of action for unlawful discrimination under § 453(a), the principal anti-discrimination provision of the Pub. Util. Code. Since it seems apparent from the preferred provider arrangement announced in the December 27 joint press release that DIRECTV itself was the source of SBCIS's knowledge about the February 28 shutdown date, it is difficult to understand how SBC ASI can be said to have discriminated among its wholesale ISP customers if, as SBC ASI maintains, it told none of them about the February 28 shutdown date.

It is clear under the caselaw that unequal treatment of similarly-situated customers lies at the core of the undue discrimination that § 453(a) has been held to prohibit. In Andersen v. Pacific Bell, 204 Cal.App.3d 277 (1988), a group of customer service representatives alleged that Pacific Bell had discriminated against them by ordering them to engage in unethical and dishonest marketing practices when offering telephone services to residential customers. In holding that the trial court had properly granted summary judgment against the plaintiffs on their discrimination claim, the Sixth District Court of Appeal quoted § 453(a) and said:

"This broad language prohibits many forms of arbitrary discrimination, including rate discrimination . . . and discrimination in hiring . . . But unless discrimination in some form is present, [§ 453(a)] simply does not apply.

"In this case, Pacific Bell gave the same marketing directive to all of its service representatives. Thus, one must ask, where is the discrimination? To quote their brief, plaintiffs argue that `Pacific made a conscious decision to use service representatives, and service representatives only, through which [sic] to carry out its overarching [sic] scheme to increase corporate revenue.' (Italics in original.) . . . But this argument does not identify discrimination among similarly situated persons; it merely attacks the division of labor. One might as well argue that a taxicab company has arbitrarily discriminated by requiring taxi drivers, and taxi drivers only, to drive unsafe cabs. To be sure, some law may have been broken, but discrimination is not a relevant or helpful concept." (204 Cal.App.3d at 285; citations omitted.)20

Perhaps recognizing the difficulty with their theory under traditional notions of discrimination, complainants also offer the following rationale for their § 453(a) claim:

"Knowing silence towards one set of customers is discrimination in favor of those privileged to have the information. This is particularly egregious when one of the parties entitled [to] the knowledge is an affiliate. SBCIS and SBC ASI were parties to a contract with [DIRECTV]. As part of that contract, apparently, SBCIS and SBC ASI agreed that the [DIRECTV] network would be maintained through the end of February and that, no end users or other ISPs would be told of the true date of
disconnection . . . So in effect, as is often the case, the affiliates were working in cooperation. SBC ASI had no information to give SBCIS, they already had it, as did [DIRECTV]. SBC ASI's failure to share this information with the rest of its customers is discriminatory." (Complainants' Response to Motions to Dismiss, pp. 13-14.)

We find this argument unpersuasive. It not only ignores the issues about protecting confidential ISP customer information raised by Ms. De La Cruz, but is also just one step removed from an argument that because another SBC affiliate -- SBCIS -- was involved, SBC ASI could not enter into any arrangement with DIRECTV that might have the effect of benefiting that affiliate in any way.21 Although the Commission takes economic effects into account in determining whether utility practices result in undue discrimination (United States Steel Corp. v. Public Utilities Com. (1981) 29 Cal.3d 603, 610-11), we decline on the facts here to read complainants' novel and potentially broad concept of discrimination into § 453(a).22 Accordingly, their claims against SBC ASI based

on failure to disclose DIRECTV's planned shutdown date must be dismissed.23

As noted in the summary of the Amended Complaint, complainants no longer allege that VADI engaged in deceptive marketing by suggesting that retail ISP customers would experience less downtime if they chose VADI rather than a non-affiliated ISP. Instead, the Amended Complaint now asserts that VADI violated various provisions of the Pub. Util. Code by (1) failing to inform non-affiliated ISPs that the shutdown date for DIRECTV's DSL network would be February 28, 2003, and (2) withholding from DSLExtreme (the only complainant served by VADI), from December 30, 2002 until January 8, 2003, any information about the "hot swap" procedure VADI had devised to minimize customer downtime, and then informing DSLExtreme only on January 14, 2003 that, contrary to earlier suggestions, the hot swap procedure could be used for retail customers seeking static IP addresses.

Like SBC ASI, VADI has moved to dismiss the allegations relating to its alleged failure to disclose the February 28 shutdown date on the ground that, even if these allegations were true, they would not state a claim for discrimination under § 453(a) of the Pub. Util. Code. No claim is stated, VADI argues, because there is no allegation that Verizon Online, VADI's affiliate, learned of the shutdown date as a result of preferential treatment by VADI.

VADI 's motion to dismiss is supported by the March 27, 2003 declaration of Thomas Wolthoff, the Director of ISP Ordering & Customer Contact for Verizon Services Organization Inc. In his declaration, Mr. Wolthoff states that on December 24, 2002, DIRECTV, VADI, Verizon Online and other Verizon telephone companies entered into a Transition Agreement whereby DIRECTV "promised to recommend to its existing customers in the Verizon region that they order new DSL service" from Verizon Online. (Wolthoff Declaration, ¶ 5.) The Transition Agreement also provided that the Verizon companies would keep DIRECTV's DSL transport lines in service through February 28, 2003. Thus, Mr. Wolthoff states, Verizon Online learned through the Transition Agreement, to which it was a party, that DIRECTV's DSL Transport service would end on February 28, 2003. (Id.)

For the same reasons set forth in our discussion of the similar allegations against SBC ASI, we agree that complainants have not stated a claim for discrimination against VADI. If VADI did not give Verizon Online better information about the February 28 shutdown date than it gave to other, non-affiliated ISPs, as Mr. Wolthoff's declaration indicates then a fortiori there has been no undue discrimination under § 453(a). And for the same reasons set forth in footnote 22, we conclude that these alleged facts also do not state a claim under either §§ 451 or 2896 of the Code.

In VADI's case there is an additional reason for dismissing these allegations. According to Mr. Wolthoff's declaration, VADI sent all of its wholesale ISP customers (including DSLExtreme) an e-mail message on January 3, 2003 stating that DIRECTV's "network will be up until February 28, 2003." (Id. at ¶ 6.)24 Mr. Wolthoff also states that DSLExtreme apparently did not receive this message because it had failed to notify VADI that it was no longer using the e-mail address in question to receive wholesale notifications. (Id. at ¶¶ 16-17.)

In their April 18 response to the motion to dismiss, complainants admit that the January 3rd e-mail described by Mr. Wolthoff was sent, and they do not dispute his claim that DSLExtreme apparently did not receive it because the company had failed to keep its "customer profile" with VADI up-to-date. (Complainants' Response, p. 7.) These admissions are an additional reason for dismissing the claims against VADI based on its alleged failure to disclose the February 28 shutdown date.

The second claim against VADI in the Amended Complaint is that it discriminated against DSLExtreme (1) by not providing information for at least nine days (December 30 to January 8) about the "hot swap" procedure VADI had devised to minimize retail customer downtime, and (2) by then waiting nearly another week (until January 14) to inform ISP customers that the hot swap procedure could, contrary to earlier suggestions, be used for retail customers seeking static IP addresses. For the reasons set forth below, we believe that these claims are also without merit and should be dismissed.

The "hot swap" procedure was VADI's solution to the problem of how to minimize the downtime experienced by retail customers making the transition from DIRECTV to a new ISP. In his March 27, 2003 declaration, Mr. Wolthoff notes that VADI began working on the hot swap procedure immediately after DIRECTV's December 13 announcement that it was leaving the DSL business, because the usual transitioning process "involves disconnecting the user from his existing ISP and installing DSL transport with his new ISP. This process is time consuming, and can leave a user without DSL service for five or more days." (March 27 Wolthoff Declaration, ¶ 9.)

As Mr. Wolthoff also states, even while VADI was starting to work out the details of how the hot swap procedure would operate, it began to receive urgent inquiries from ISPs about what to tell customers who wished to transition to them from DIRECTV. On December 17, for example, VADI received such an inquiry from Verizon Online. In response, VADI told its affiliate that it "could either tell the prospective customers that they could proceed with the standard disconnect/install procedure, or it could tell them not to disconnect from [DIRECTV] and hold their orders while VADI tried to develop a more efficient transition process." (Id. at ¶ 10.) After reassuring all its ISP customers by e-mail on December 20 that it was working on a more efficient transition procedure, VADI on December 24 and January 3 sent e-mails to all of its ISP customers with the same advice about continuing to hold customer orders that it had given Verizon Online. (Id. at ¶¶ 11-12.)25

The availability of the hot swap procedure was finally announced on January 8, 2003 in a detailed, step-by-step e-mail message that was sent to all of VADI's ISP customers; it is attached to Mr. Wolthoff's March 27 declaration as Exhibit D. The January 8 message was careful to point out the hot swap procedure could be used only for customers with dynamic IP addresses -- i.e., those not engaged in web hosting -- and that "a process for transitioning customers to static IP service is being developed." (Exhibit D, p. 2.) On January 14, VADI sent another e-mail to all of its ISPs informing them that due to the nature of its network architecture in the Western U.S. (including California), the hot swap process could, in fact, be used for customers seeking static IP addresses. (March 27 Wolthoff Declaration, ¶ 18 and Exhibit G.) Mr. Wolthoff also notes that "VADI did not supply this information to [Verizon Online] or any other ISP prior to January 14," and that all of its ISP customers received such information at the same time via e-mail. (Id.)

DSLExtreme's response to Mr. Wolthoff's narrative is to charge that, in order to benefit Verizon Online, VADI first delayed announcing the hot swap procedure, and then delayed announcing the fact that the procedure could be used for static IP addresses. On the first issue, DSLExtreme states:

"As the announced transition partner, [Verizon Online] stood to benefit from the delay. During this time [i.e., from December 18 to January 8], [DIRECTV] customers had the option of choosing minimal disruption via [Verizon Online] while its affiliated network provider was determining a hot swap procedure, or submitting an order to another ISP that had no information and was hostage to VADI's whims. In DSLExtreme's case, they were captive until just 36 hours before the first scheduled demise of the [DIRECTV] network." (Complainants' April 18 Reply, p. 8.)

On the question of the timing of the announcement that the hot swap procedure could be used for static IP addresses, DSLExtreme claims:

"[Verizon Online], using dynamic IP procedures announced on January 8th, enjoyed a full week advantage over DSLExtreme for attracting [DIRECTV] refugees. This was a critical week because it was the week before the date that all of [DIRECTV's] customers thought their service would be disconnected, January 16th." (Id.).

The problem with DSLExtreme's assertions is that they run afoul of both the realities of the DSL market and of the press releases and advertisements attached to the Amended Complaint. As to DSL marketing realities, one of the most important factors is that only customers with static IP addresses can engage in "web hosting"; i.e., maintaining websites. In his April 25, 2003 reply declaration, Mr. Wolthoff states that as a result of this:

"[C]onsumers seeking static IP addresses represent a different segment of the market for DSL internet services than consumers seeking dynamic IP addresses. Therefore, customers seeking static IP addresses would be unlikely to select a dynamic IP service just because the dynamic IP service offered short term convenience in installation due to the availability of a hot-swap process." (April 25 Wolthoff Declaration, ¶ 5.)

The e-mail that VADI sent to all of its ISP customers on January 8 expressly noted that (1) the new hot swap procedure would work only for dynamic IP addresses, and (2) "currently, all [DIRECTV] customers are provisioned with static IP addresses." (March 27 Wolthoff Declaration, Exhibit D.) In view of the latter statement - an assertion with which DSLExtreme has not taken issue - it seems clear that VADI was not in a position to help Verizon Online by delaying the announcement that the hot swap procedure would work for static IP addresses, because DIRECTV customers who wished to retain static IP addresses after the transition would, in Mr. Wolthoff's words, "be unlikely to select a dynamic IP service just because the dynamic IP service offered short term convenience in installation . . ."26

DSLExtreme also claims that the six-day "delay" in announcing that VADI's hot swap procedure would work for static IP addresses was "critical" because January 8-14 was "the week before the date that all of [DIRECTV's] customers thought their service would be disconnected, January 16th." The problem with this argument is that if any DIRECTV customers in Verizon territory thought their DIRECTV service would be shut down on January 16, it was not as the result of any statement made by VADI or Verizon Online.

The only statement in the record by any of the defendants referring to a possible January 16 shutdown date is the joint press release issued by SBC and DIRECTV on December 27, 2002. This press release, which is Exhibit 2 to the Amended Complaint, includes a statement by Ned Hayes, DIRECTV's president, that "we have communicated to our customers that the DIRECTV Broadband network will be operational until at least January 16, 2003, so we encourage DIRECTV DSL customers in the SBC territory to quickly take advantage of" the opportunity to transition to SBC Yahoo. Even if this statement persuaded some customers to choose either SBC Yahoo or Verizon Online as their new DSL provider because there was little time to research alternatives, the statement can be imputed only to SBCIS, not to VADI. (VADI Motion to Dismiss, pp. 13-14.)27

Thus, there is no merit in the Amended Complaint's claims that VADI discriminated in favor of Verizon Online with respect to the January 8 announcement of the hot swap procedure, or the January 14 announcement that the procedure could also be used for static IP addresses. The uncontroverted evidence in Mr. Wolthoff's declarations shows that (1) VADI gave Verizon Online the same information with respect to the procedure and how to handle DIRECTV "refugees" that it offered to every other ISP, (2) VADI's advertisements did not suggest DIRECTV's DSL network would be shutdown anytime before February 28, and (3) due to Verizon Online's own internal systems, it was at a disadvantage after the January 14 announcement in competing with other ISPs for DIRECTV customers who wanted to retain static IP addresses. The complainants cannot defeat a motion to dismiss supported by such a detailed factual showing merely by citing to their own pleadings, attacking the opposing declarants' credibility, or vaguely suggesting that discovery may enable them to turn up some contrary evidence. VI Witkin, CALIFORNIA PROCEDURE (4th ed.), Proceedings Without Trial §§ 201, 208; Weil & Brown, CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL ¶¶ 10:198-10:201. Accordingly, all of the allegations against VADI in the Amended Complaint concerning the hot swap procedure must be dismissed.

As is evident from the lengthy history of this proceeding, the allegations in the Amended Complaint are the second set of liability theories complainants have asserted against VADI, and the third set of allegations complainants have made against SBC ASI and SBC California. In its reply brief in support of the motion to dismiss, VADI notes in response to yet another set of allegations raised for the first time in complainants' April 18 brief28 that "DSLExtreme's theory of the case continues to evolve with every new filing," and that "DSLExtreme's modus operandi all along" has been to come up with a new theory of liability as soon as defendants have refuted the prior one. VADI urges that "unless the Commission puts an end to DSLExtreme's fishing expedition, it will never end." (VADI Reply Brief, p. 1.)

In its motion to dismiss the Amended Complaint, SBC ASI makes a similar argument:

"While the ALJ has shown remarkable patience with the Complainants, allowing them to restate their complaint on two occasions to cure obvious problems of pleading and proof, the amended complaint is no closer to setting forth causes o[n] which the Commission may act. We respectfully request that Complainants not be permitted to further amend the Complaint, particularly given the fact that [the] underlying transaction about which they complain has been completed and the [DIRECTV] subscribers have found new service providers." (SBC ASI Motion to Dismiss, p. 19.)

We are normally reluctant to dismiss complaints without leave to amend, especially where significant discovery has not yet occurred. However, it is appropriate to make an exception to that general policy in this case. As is evident from the history of the case set forth above, complainants have made factual allegations they have failed to investigate, asserted legal theories that are plainly at odds with existing law, and repeated allegations that were discredited at the TRO hearing. In view of this history, there is no reason to think that granting them yet another opportunity to amend their complaint and pursue discovery would yield a record justifying a hearing.

The situation here is somewhat similar to the one described in Chicago Title Insurance Co. v. Great Western Financial Corp., 69 Cal.2d 305 (1968). In that case, the California Supreme Court upheld a decision of the Superior Court's Appellate Department sustaining demurrers without leave to amend to a fourth Amended Complaint. The plaintiffs, a group of title insurance companies, alleged that Lehman Brothers and firms in which it had a controlling interest had conspired to monopolize the title insurance business in Los Angeles County, had engaged in a group boycott of plaintiffs, and had stolen away one of plaintiffs' principal title insurance customers by agreeing to pay the customer secret rebates.

After holding that plaintiffs had failed to state a cause of action under the Cartwright Act pursuant to any of their theories, the Supreme Court agreed that further leave to amend the complaint should be denied. The Court said:

"There is a dangerous vice inherent in the complaint with which we are herein presented because it is ambiguous and investigatory in nature. Respondents are entitled to know [] what acts constitute the alleged violations so that the time and expense involved in conducting an investigation and pursuing discovery may be reasonably limited, for the complaint might otherwise be construed as a blanket license to indulge in interrogatories, depositions, and motions to produce ad infinitum, ad nauseam . . .

* * *

"By irresponsible pleading containing unrestrained and unverified allegations, appellants attempt to secure the right by discovery to explore at random and at enormous expense to respondents, several large and important businesses and their relationships with one another . . . The method used by appellants has been aptly characterized by Judge Kaus as a `shotgun' technique where plaintiffs deal solely in broad generalities and otherwise indulge in factual and legal conclusions, unsupported speculation and argumentative allegations." (69 Cal. 2d at 326-27; citations omitted.)

We regret to say that in their two complaints and TRO motions, complainants here have engaged in similar conduct. Accordingly, the Amended Complaint herein will be dismissed with prejudice and without leave to amend.

15 Even though the misleading advertising is alleged to have benefited SBC California's ISP affiliate, SBCIS, neither that company nor Verizon Online has been named as a defendant here, because complainants recognize that this Commission does not exercise jurisdiction over information services such as ISPs. (D.98-10-057, 82 CPUC2d 492, 497-99; D.02-10-060, Appendix A, p. 19.) Based on a claim that it was merely acting as an agent for SBCIS in sending out the mailer, SBC California argues that the Amended Complaint should be dismissed as to it because "the Commission does not have jurisdiction over marketing that SBC California performs on behalf of SBCIS." (SBC California Motion to Dismiss, p. 12.) We do not need to rule on this dubious jurisdictional argument here, because we assume for purposes of this motion that, since the mailer was promoting the bundle of services being offered by SBC California (including SBC Yahoo service), the mailer was prepared by and intended to benefit SBC California directly. 16 In Greenlining Institute v. Public Utilities Com., 103 Cal.App.4th 1324 (2002), the First District Court of Appeal held that the Commission lacks jurisdiction to enforce the provisions of the UCL in its proceedings. However, just as the Commission takes the antitrust implications of its decisions into account even though it does not have jurisdiction to enforce the antitrust laws, Northern California Power Agency v. Pub. Util. Com., 5 Cal.3d 370, 377-79 (1971), we also think it is appropriate to take the standards of the UCL into account when interpreting Pub. Util. Code provisions that have similar purposes. In this case, we think the purpose of Pub. Util. Code § 2896 -- which requires telephone corporations to furnish prospective customers with "sufficient information upon which to make informed choices among telecommunications services and providers," including the provider's identity, service options, pricing, and terms and conditions of service -- is sufficiently similar to the purpose of B&P Code § 17500 -- which prohibits any person, firm, corporation or association from making or disseminating any statement in connection with goods or services for sale "which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading" -- that it is appropriate to use the reasonable consumer standard when interpreting § 2896. 17 See Pub. Util. Code § 1701; D.94-08-028, 55 CPUC2d 672, 677 (1994). 18 For a Commission decision to the same general effect, see D.01-08-061, California Dept. of Transportation v. Crow Winthrop Development Limited Partnership, in which the Commission dismissed without prejudice a complaint against Pacific Bell under § 626 of the Public Utilities Code alleging that Pacific's arrangements with a property developer had unreasonably restricted the access of Cox Communications to tenants on property controlled by the developer. Although Cox argued it had not been allowed to complete its discovery, the Commission granted the dismissal because Cox had raised this issue only at the last minute. The Commission also rejected Cox's argument that it should be allowed to amend the complaint, noting that "complainants sought leave to extensively amend their complaint, raising new issues for the first time," which would make compliance with Pub. Util. Code § 1701.2(d) difficult. (Mimeo., at 27-29.) 19 In a footnote to its motion to dismiss, SBC ASI adds that "if this matter were to go to hearing, we would show that SBCIS knew of the DSL Transport connectivity date because it was told directly by [DIRECTV], not as a result of any information obtained from SBC ASI." (Id. at 3, n. 3.) In view of the preferred provider arrangement announced in the joint press release issued by DIRECTV and SBCIS on December 27, 2002, and the fact (discussed infra) that both VADI and Verizon Online were parties to the Transition Agreement whereby the latter became the preferred provider for transitioning DIRECTV customers in Verizon territory, SBC ASI's assertion is more than plausible. 20 For a Commission discussion of § 453(a) to the same effect, see Re Southern California Gas Company, D.96-09-104, 68 CPUC2d 379, 383-384 (1996). 21 Indeed, the breadth of complainants' theory is shown by ¶ 3 of the prayer for relief, which asks for "an order prohibiting SBC ASI and VADI from extending to any affiliated ISP any contract or agreement, or any rules, facilities or privileges, in providing and supporting DSL Transport and related services unless such items are extended to all similarly-situated ISPs operating in California." (Amended Complaint, p. 28.) Complainants' argument also ignores the legitimate interest of DIRECTV -- an entity over which we do not exercise jurisdiction -- in encouraging its customers through truthful communication to migrate sooner rather than later to a new ISP. 22 Complainants' inability to state a claim under § 453(a) is also fatal to their claims based on the same facts under §§ 2896 and 451. With respect to § 2896, there is a serious issue whether this provision is intended to protect wholesale customers such as complainants. The Commission's recent decisions in Utility Consumers' Action Network v. Pacific Bell strongly suggest that § 2896 was intended only to codify existing protections for residential telephone customers, not to benefit customers like complainants who purchase DSL Transport on a wholesale basis. See, D.01-09-058, mimeo. at 15-17; D.02-02-027, mimeo. at 6-8. Even if complainants are covered by § 2896, however, the last sentence of subsection (a) thereof states that "a provider need only provide information to its customers on the services which it offers." In its motion to dismiss, VADI argues that this language cannot reasonably be construed as imposing a duty on it to disclose to ISP customers such as complainants when a different ISP customer will stop taking DSL transport service:
"The information allegedly withheld from DSLExtreme, however, does not even relate to the service provided to DSLExtreme (i.e., DSL transport) but to when a different customer, DirecTV, would stop receiving service from VADI. There is no authority holding that either [§§ 451 or 2896] is implicated where a utility allegedly fails to inform its customers about what another customer has elected to do with his service. Such information obviously has nothing to do with the quality of service provided to DSLExtreme. VADI is a provider of DSL transport, not a purveyor of information. VADI's alleged failure to provide DSLExtreme with information about the service it provided to DirecTV did not render the quality of the DSL transport that DSLExtreme received unreasonable or inadequate . . ." (VADI Motion to Dismiss the Amended Complaint, p. 20; emphasis in original.)
We agree with this analysis, and so conclude that in view of SBC ASI's responsibility to protect the confidentiality of proprietary customer information such as DIRECTV's, complainants have failed to state a claim under either §§ 451 or 2896 of the Pub. Util. Code based on SBC ASI's failure to inform other ISPs of the date on which DIRECTV's DSL Transport service would end. 23 Because we are dismissing all of the allegations in the Amended Complaint against SBC ASI, there is no need to address in this order the lengthy argument made in SBC ASI's motion to dismiss that this Commission lacks jurisdiction to regulate wholesale DSL Transport service on the ground that it is an interstate service subject to regulation by the Federal Communications Commission. See, SBC ASI Motion to Dismiss, pp. 2, 9-14. We note, however, that our recent decision in the CISPA case, D.03-07-032, effectively rejects SBC ASI's jurisdictional argument. In D.03-07-032, we specifically affirmed a March 28, 2002 ruling issued by the Assigned Commissioner and the assigned ALJ in the CISPA case that rejected a jurisdictional argument nearly identical to SBC ASI's position here. (Mimeo. at pp. 3-4; Ordering Paragraph 4.) The March 28, 2002 ruling (which is attached to D.03-07-032 as Appendix B) stated that "we reject Defendants' assertions that the Commission does not have jurisdiction to pursue claims of fraudulent or misleading conduct, or poor service quality relating to DSL service," although it agreed with defendants that "the scope of the complaint should not include the reasonableness of DSL rates, operating speeds and the like set forth in the federal tariff . . ." (Appendix B, p. 11.) 24 Mr. Wolthoff states that although VADI believed it was authorized to reveal the shutdown date to its ISP customers, DIRECTV objected to the January 3 e-mail and VADI did not mention the date again in its subsequent e-mails to customers. Nonetheless, as VADI points out in its April 25 reply brief in support of the motion to dismiss, VADI "did nothing to retract [the] information," and "the proverbial cat was out of the bag." (VADI Reply, p. 4, n. 3.) 25 Although DSLExtreme did not receive the January 3 e-mail because of its failure to update the e-mail addresses in its VADI customer profile, Mr. Wolthoff's opening declaration indicates that DSLExtreme did receive the December 20 and 24 e-mail messages. (March 27 Wolthoff Declaration, ¶ 16.) 26 In paragraph 19 of his March 27 declaration, Mr. Wolthoff states that "although the static IP hot - [swap] process was available for all unaffiliated ISPs on January 14, [Verizon Online] has never been able to use it due to its own internal ordering system requirements for static IP addresses." Based on this, VADI argues that Verizon Online was actually disadvantaged by the announcement that the hot swap procedure would work for static IP addresses. (VADI Motion to Dismiss Amended Complaint, p. 18.) 27 We also think the following footnote from VADI's motion to dismiss fairly characterizes the statements about a DIRECTV shutdown date that VADI and Verizon Online actually did make:
"Statements that were issued by [Verizon Online] are consistent with a February 28 termination date and, tellingly, [are] not referred to in the Complaint. VADI's December 30 press release [Exhibit 3 to the Amended Complaint] estimated a March termination date, by referring to [DIRECTV's] December 13th press release and its stated intent to maintain service for `approximately ninety days' from that date. Therefore, this press release could not have left [DIRECTV] subscribers with the impression that their service would end in January. [Verizon Online's] promotional website [Exhibit 4 to the Amended Complaint], which told subscribers not to disconnect their [DIRECTV] service if they wanted to take advantage of an offer that was valid `through 2/28/03,' similarly does not suggest a January disconnection. The clear implication of this offer is that [DIRECTV's] service would remain operational at least until the promotion ended - or until February 28, 2003." (Motion to Dismiss, p. 14, n. 8; emphasis in original.)
28 In their April 18 response to the motions to dismiss, complainants assert for the first time that under the Transition Agreements with DIRECTV, SBC ASI and VADI both agreed to reduce DIRECTV's indebtedness to them directly in proportion to the number of DIRECTV customers who chose to go with either SBCIS or Verizon Online, and that "SBC ASI and VADI agreed to engage in activities designed to steer as many customers as possible to SBCIS and [Verizon Online.]" (April 18 Response, pp. 2-3.) As VADI correctly notes in its April 25 reply brief, the complainants cannot cure pleading defects in the Amended Complaint by coming up with new allegations of discrimination in a responsive brief. See, Robinson v. Hewlett-Packard Corp. (1986) 183 Cal.App.3d 1108, 1131-32 (issues not raised in the complaint could not be considered on a summary judgment motion); City of Hope Nat'l Med. Ctr. V. Superior Court (1992) 8 Cal.App.4th 633, 639 (same). Moreover, in his April 25 reply declaration, Mr. Wolthoff flatly denies the new allegations. He states that "the consideration [DIRECTV] received under the Transition Agreement was a reduction in its debt to VADI by a fixed amount, and did not vary by the number of customers who transitioned from [DIRECTV] to [Verizon Online.]" Mr. Wolthoff also notes that Verizon Online "paid to VADI the difference between the amount that [DIRECTV] owed under VADI's tariff nationwide and the reduced amount that [DIRECTV] actually paid to VADI under the Transition Agreement." (April 25 Wolthoff Declaration, ¶¶ 2-3.)

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